Testimony: Medicaid Reform & State's Credit Rating

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Dear Friend,

Bruce at AFA

Maine state government's credit rating is an important tool to attract jobs.  Our credit score is a visible measurement of Maine's fiscal and economic health.  Businesses choose to invest their money in states where government can pay its bills, and taxes and regulations are fair and predictable.  Otherwise, employers rightly fear that their companies and workers will likely pay higher taxes to fund unaffordable programs, or their public services will be cut.

The credit rating agencies are watching Maine state government to see how it deals with our unaffordable Medicaid program.   The Maine Department of Health and Human Services (DHHS) calculates a $221 million shortfall in the program through June 30, 2013, the end of the two-year budget cycle.  Governor LePage has submitted a supplemental budget to the Legislature that includes adjustments to the program to make it solvent and affordable.  Without adopting these reforms, DHHS reports that our Medicaid program will run out of money in April.

The proposed changes to our Medicaid program (called Mainecare) will bring the benefits and costs more in line with those of other states.   In 1998, approximately 154,000 of our most disadvantaged fellow Mainers were enrolled in this taxpayer-funded health care safety net. During the last 13 years, this number has increased by 134% while our population has grown by roughly 4%.  Today, there are 361,000 individuals in the program, the 3rd highest enrollment rate of any state in the country.

Maine state government has an opportunity to demonstrate to the people of Maine, and to the credit rating agencies, that it will live within its means.  That it will no longer spend more than it takes in.  That it will address our long-term liabilities without budgetary gimmicks. That it will make the difficult but necessary decisions to redesign our unaffordable Medicaid program for the benefit of the most vulnerable, and for fairness to the taxpayers alike.

Let's work together to demonstrate to job creators that Maine is a promising place in which to invest.   Fiscal discipline, economic growth, and jobs are all connected.

Below is my testimony on December 16 before the Appropriations Committee of the Legislature:


"Thank you Senator Rosen, Representative Flood, Senator McCormick, Representative Strang Burgess, and distinguished members of the Appropriations and Financial Affairs, and the Health and Human Services Committees. I’m Bruce Poliquin, State Treasurer.

I appreciate the opportunity to bring to your attention an important factor as you deliberate the Governor’s proposed Medicaid reforms included in his 2012-13 Supplemental Budget. This important factor is the State’s credit rating.

Standard & Poor’s currently rates our General Obligation bonds “AA with a Negative Outlook,” and Moody’s rates them “AA2 Stable.” These credit ratings are in the bottom 40% among the other states.

During exhaustive discussions with the rating agencies this past spring and fall, Maine state government’s commitment to rebuild our financial reserves, and to pay down our accumulated obligations to hospitals were viewed favorably. As you know, these amounts owed to hospitals were primarily due to Medicaid services provided over a number of years. In its May, 2011 credit report, Standard & Poor’s stated that our negative outlook “…could be revised back to stable if Maine’s financial, liquidity, and liability positions improve…” That means, in part, spending only what we take in, and paying down our debt.

Maine’s bond rating is a tangible and visible measurement of our state government’s fiscal health and discipline. A high rating keeps our interest payments low, and helps to attract business investment and jobs.

One needs to look no further than Washington to see the results of fiscal imprudence, and a credit downgrade. Washington’s fiscal recklessness has created deep uncertainly within the business community, which is discouraging capital investment and job creation.

Maine state government is highly dependent on funds flowing from Washington. 43% of federal government spending is for Medicaid, Medicare, and Social Security. One can reasonable expect less federal tax revenues flowing to the states in order for Washington to put its own fiscal house in order. The largest sum of money flowing to Maine from Washington is for our Medicaid program.

The rating agencies are closely watching all states to see how they deal with their structural Medicaid problems. They know that Maine’s Medicaid enrollment has grown from 154,000 in 1998 to 361,000 today. They know that 27% of our citizens are enrolled in Medicaid, the 3rd highest enrollment rate in the country. They know that federal stimulus money is gone.

The credit rating agencies will look favorably upon those states that embrace fiscal discipline. Those that spend only what they can afford; pay off their debts; and balance their budgets without gimmicks. Let’s keep Maine state government continuing down our path of long-term fiscal health.

Thank you. I’d be pleased to answer any questions that you might have."

Bruce Poliquin
Maine State Treasurer


For related information and media, visit www.maine.gov/treasurer/outreach.